loan documentation

Dictionary of Banking Terms for: loan documentation
loan documentation

credit-related documents, including the loan contract, financial statement, business plan, documents of the lender’s security interest, and other papers that are used by the lender in evaluating creditworthiness of a prospective borrower. These documents, detailing the history of a loan, are kept in the borrower’s credit file, for later review by the loan review committee and by field examiners from the lender’s primary supervisory agency.

Proper documentation is important in lending because the quality of documentation in the loan portfolio is directly related to credit quality ratings assigned by bank examiners. For example, a loan with an inadequate loan agreement or poor collateral control is classified by examiners under the heading special mention. This means the loan is a potentially weak credit, and deficiencies in documentation need to be corrected to assure full repayment according to the original loan agreement.

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